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us stock market, trade stock
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11/18/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued CREE
Buy alerts issued: SNDK; UOPX
Trailing stops issued: None issued
Stop alerts issued: AMLN
THE ECONOMY
Hiring plans not robust, but not the desert of the early 1990's.
Manpower released a survey today indicating that employers are slightly more confident about hiring in early 2003 than they were for early 2002 (and more confident from the last survey for that matter). A key conclusion of the survey is that hiring and plans to hire are at greater levels than they were in the same period following the 1990 recession. Thus while jobs are hard to find and not being created quickly, they are still more plentiful than they were last recession. Small consolation for those seeking work, but it does shed some light on the recovery status. Very importantly the survey results indicate that the low point for the 'intention to hire' level was in Q1 2002. Since then the measure of those planning on hiring in Q1 2003 has doubled. Manpower concludes that is quite a positive comment on the status of jobs recovery.
This data continues to show that the seeds of recovery are sprouting. It is no longer really a 'when will the bottom be here' analysis but one of whether the recovery will pick up speed. It is important that short sighted concerns over budget deficits, deficits that will cure themselves with a stronger economy and a bit of fiscal restraint, trample on the recovery with threats to roll back tax cuts and other traditionally negative actions against the economy. The recovery is starting every so slowly, and we need to pour on some more sauce as opposed to arguing over deficits that are even a smaller part of GDP today than they were in the 1990's.
That does not mean we need to rush to pass legislation for anything. This homeland security bill is quite alarming as it gives the government, in the name of homeland security, the legal right to collect and keep records on anything you do: bank deposits, doctor visits, ATM withdrawals - - just about everything you do the federal government will be able to legally know about you. There will be no more privacy if this bill is pushed to the limits of its wording. Sure a lot of people trust that Bush is an honest man, etc., but governments are not one man or woman. There are many potential areas of abuse all along the bureaucracy, and that is what scares most people that take the time to look at this legislation. Sorry about the aside there, but this bill is pretty sobering reading.
Retail sales are not as bad as first thought as some recant their earlier stances.
The Consumer Federation of America survey indicates that overall the holiday season will be better than last year. Man is that a change. The primary factor the CFA looked at (though there were others) is that the number of those planning on spending less this season is significantly less than that number in 2001, and the number of those planning on spending more this season was significantly higher than the 2001 levels. That both changed significantly in the pro-spending direction indicates sales will be better this year.
What is fascinating about the findings is that most of those reporting on them parrot that 2001 was a bad holiday shopping season. Perhaps they simply went back to the pre-holiday reporting to refresh memories on what happened last year without looking at the results that came out in early 2002 regarding the season. Or perhaps they looked at Wal-Mart's weekly sales update and saw it was at the low end of plan and then drew the conclusion that the entire season would be bad because the largest retailer is showing some weakness.
That, however, is not considering the numbers. WMT is being hurt in its Sam's Club sales, the warehouse club where you buy in bulk (more or less). As we reported last month, many, many retailers that are not traditionally discounters that got hammered by the Wal-Mart's last year are adopting that pattern and offering big incentives to come into their stores. What WMT loses in warehouse club sales the JCPenny and others are picking up with revamped floorplans and some pretty amazing early season sales. They are poaching from WMT using WMT's own price-cutting strategy. It is an aggressive strategy that depends upon getting a lot of customers in and buying, but it can work as seen with TGT that reported great earnings and is running aggressive sales early this season. JCP is doing the same. They are not alone. Some will win, some will lose, but that is the way it is every holiday season. That, however, does not mean it is a bad season.
THE MARKET
The positive pre-market tone was, as is often the case when stocks are up for no real reason, an illusion. The buying in the overall market was over in the first few minutes though several stocks enjoyed very solid sessions on very solid volume. The most disappointing aspect from the upside perspective was the Nasdaq's inability to once again break through that August and early November top. The indexes put on a good show from lunch to the early afternoon, but then that slipped away. Then it got worse as a late bounce attempt failed before it got underway and the indexes dropped sharply to close at the session lows. That last push in selling really pressured the market. Nasdaq volume ran up, slightly eclipsing Friday's lower volume session. That was the first bad day of price/volume action in a couple of weeks, and the failure at resistance once again on top of that is a warning flag. It can still turn back up with a higher low buy holding near support and plow on through, but buyers will have to step up from here as three failures at a resistance point is not a good indication of upside strength.
Sentiment Indicators
VIX: 31.11; +0.28
VXN: 48.09; -1.59
Put/Call Ratio (CBOE): 0.65; +0.08
Nasdaq
Gapped higher to resistance and then turned down. Volume kicked in late in the session and pushed it above Friday's trade.
Stats: -17.45 points (-1.24%) to close at 1393.69
Volume: 1.769B (+3.85%). Trade moved up on the selling late, still above average.
Up Volume: 795M (-217M)
Down Volume: 950M (+275M). Not impressive downside. Usually when the indexes have sold of late the winning side has really outpaced the losing side.
A/D and Hi/Lo: Decliners led 1.38 to 1. Once again very mild breadth on a negative session.
Previous Session: Decliners led 1.12 to 1
New Highs: 60 (+5)
New Lows: 45 (+8)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Once again the Nasdaq tried resistance at 1423, and once again it failed to make the break. Given the gap early, the first failure early in the session was not that big a deal. When it rolled over and sold late on stronger volume, that was more worrisome as it indicated that there were stockholders ready to sell when the Nasdaq failed to clear that resistance. While this raises a caution flag we are not ready to push the panic button and declare the market is going to tank from here. The Nasdaq has been the leader of late, so it is not good to see, but it is far from being dead. There is possible near term support at the 10 day MVA (1377) and then a range supported by the gap up point at 1360, 1357 (the 1998 bear market low), and the late July and September highs 1354). One day of distribution does not stop a rally, but the fact that it occurred at the August high will draw a lot of negative commentary. The key will be what it does here at near support and what the volume is on the way there. We still like what we see overall given the strength in the chips, telecom, some internet.
S&P 500/NYSE
The large caps had some trouble of their own at resistance, failing to hold a move through near resistance, but it sold on much lighter volume.
Stats: -9.47 points (-1.04%) to close at 900.36
NYSE Volume: 1.258B (-8.77%). Volume shrank back nicely, coming in at very low, below average volume.
Up Volume: 508M (-446M)
Down Volume: 747M (+334M)
A/D and Hi/Lo: Decliners led 1.3 to 1. Still very tame breadth.
Previous Session: Advancers led 1.47 to 1
New Highs: 39 (+5)
New Lows: 33 (+9)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps rallied over the late July, early August, and mid-September interim tops (909-911), hitting 915.91 on the high. That was it, however, as the rest of the session the SP500 sold. A modest mid-day rise gave way to slide lower the last two hours. Unlike Nasdaq, volume did not ramp up on the selling, coming in well below average. It also held at near term support above 900 (10 day MVA at 898), the point marking the top of the late October consolidation. Ample support below as well at the 18 day MVA (892) and the 50 day MVA (885). If volume stays light and Nasdaq is able to pare the selling we expect it to hold the near term support and make another run to take out that resistance as well as the early November high at 925. It will need the Nasdaq to re-take the lead, however.
Dow:
The blue chips were tagging along for the ride, selling down on lower volume but able to hold near support at roughly 8500.
Stats: -92.52 points (-1.08%) to close at 8486.57
Volume: 1.258B (-8.77%)
The Dow had no conviction, unable to hold the move up to 8636 (session high), giving back that move and more as the market turned to the afternoon slide show. The Dow held support for practical considerations, with the 10 day MVA at 8495 and the 18 day MVA at 8446. Dow volume fell off the table on pullback; there was no rush to dump Dow shares just as there was no rush to dump large cap stocks. An intraday test to the 18 day MVA or a bit lower and then a recovery is what the Dow needs, but its action will be driven by the other two big indexes.
The Chart: http://www.investmenthouse.com/cd/$indu.html
TUESDAY
The Consumer Price Index is out before the open, and with the PPI ramping higher than expected, the CPI is receiving a lot of attention. We are not expecting anything out of the ordinary, but the seasonal adjustments made at this time of the year as seen with the PPI can exacerbate any changes.
The real key will be watching how Nasdaq and its stocks perform. The A/D line showed most stocks selling Monday, but it was not a massive push downside. It was focused in banking, cyclicals, homebuilding, some insurance. Chips and telecoms did not do bad, and there were still many good breakouts while other stronger stocks tested back toward near support. Thus it was not a bad session but the rising volume indicates more were willing to sell some Nasdaq stocks ahead of the Iraq inspections and other uncertainties this week.
Unless we see selling really pick up the pace, we view a pullback to support by leading stocks as an opportunity to accumulate some more positions. We are going to watch closely how all of the indexes trade around support tomorrow and on what volume. This may take more than Tuesday to work through, but the trend remains up off of the lows. Nasdaq must, however, hold near support, make a higher low, and then break that August high. If it cannot do that in relatively short order, the prospects of a lower test increase.
We still see many good upside plays as today did not terminate the rally. There are stocks ready to make their moves and other stocks pulling back on some lighter volume as they prepare to test support and move higher. We will let them work through their patterns and start their moves; that is the nice thing about this: we can wait for them to show us the time is right. There are also some sectors showing downside softness such as the regional banks, and we are looking at taking advantage of that weakness as it presents itself as well.
Support and Resistance
Nasdaq: Closed at 1393.69
Resistance: 1418, the interim test after the September 2001 low, and 1426 the August high. Then some price resistance at 1500 and the 200 day MVA (1510).
Support: The 10 day MVA (1377) is possible support. 1357.09, the October 1998 bear market low and the 18 day MVA at 1355. July, August, and September interim highs at 1345. The 50 day MVA (1317). 1250 from some prior price lows. 1200 (August closing low) to the July intraday low at 1192.42. There is price support from 1080 to 1100. Then there is a big shelf of support at 1050 down to 1000.
S&P 500: Closed at 900.36
Resistance: July, August and September interim highs at 909 to 911. Some resistance at 921 up to the November high at 925.66. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high. Then price resistance at 990.
Support: The top of the late October consolidation range at 899. The 10 and 18 day MVA (898; 893). The 50 day MVA (885). The September 2000/May 2001 downtrend line at 884. The March down trendline at 873. 850 to 855 (the October 1997 and Q2 1998 lows). Prior closing lows and highs at 800 from July and October. The July intraday low at 775.68. 750 to 760 with an intraday touch to 730.
Dow: Closed at 8486.57
Resistance: The late July and early September interim high at 8726 to 8762.14 (8745 closing) and the November high at 8800. A range of resistance from 9000 on up to 9050. The 200 day MVA (9225). 9500 from June and July lows.
Support: 8500 from October high and the 10 day MVA (8495). The 18 day MVA (8446). The exponential 50 day MVA (8359) and then 8250. The simple 50 day MVA (8175). 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-19-02
CPI, October (8:30): 0.3% expected, 0.2% prior.
Core CPI: 0.2% expected, 0.1% prior.
Trade balance, September (8:30): -$37.3B expected, -$38.50B prior.
11-20-02
Housing starts, October (8:30): 1.710M expected, 1.843M prior.
Building permits, October (8:30): 1.698M expected, 1.733M prior.
11-21-02
Initial jobless claims (8:30): 394K expected, 388K prior.
Leading Economic Indicators, October (10:00): -0.1% expected, -0.2% prior.
Philly Fed, November (12:00): -3.0 expected, -13.1 prior.
Treasury budget, October (2:00): -$51.3B expected, -$7.7B prior.
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TEAM TRADES
SNDK: Not all trades work out right off the bat though they do have the attributes to still turn out to be nice winners. SNDK was up early and we wanted to take some partial positions as it looked very strong after showing very good action late last week. Volume was not huge early, but we could see it was going to be a strong volume session. We went ahead with some partial positions early in stock and options ($7 on the options). SNDK continued up but then turned lower, testing the prior close on the low. The prior close is one point that can act as support on a gap higher. Indeed, that is often the point we enter on a gap up if it holds on the test. Well it did, and it would have been wisest to not get enamored with last week's action and early move and wait. As it turned out, SNDK leaped off that level and spent the bulk of the day rallying on up to near 23. That was great. Then it just slid off the slope in the last hour with the rest of the market. It gave it all of the afternoon work back and closed wehre it started the session and left our options at 6.40 by 6.70. Volume was great but you never like to see the big reversal on the breakout. SNDK was a victim of the market, but the market rules. What we need to see now it it continue to hold the breakout and add to the break from here.
THE PLAYS:
Good movers: ALN; AVID; CREE; MVL
Downside:
NYCB (New York Bancorp--$27.81; -0.53; optionable): Savings & loan
http://biz.yahoo.com/p/n/nycb.html
STATUS: Put. NYCB ran up to the 200 day MVA (28.40) the prior week on lower and lower volume, then Monday tapped the 200 day and rolled over on a big surge in above average volume. This marks a lower high below key resistance. There is also a lot of distribution in the stock as smaller financials are under pressure from the rate cuts. Looking for the higher volume to turn into more selling.
Volume: 1.865M Avg Volume: 940.545K
BUY POINT: $27.45 Volume=950K Target=$25 Stop=$28.55
POSITION: NQK MF - Jan. $30p (-60 delta)
http://www.investmenthouse.com/ci/nycb.html
Upside:
OMX (Officemax--$5.39; -0.03; no options): Office supplies, phones, computers
http://biz.yahoo.com/p/o/omx.html
STATUS: Testing the breakout. OMX moved well off of the October low, crossing the 200 day MVA (5.27) two weeks back and since making a lower volume test. The past four sessions volume has fallen below average as it tested lower. Monday OMX tapped the 18 day MVA on the low (5.16) and rallied back for a fractional loss. That is good action, suggesting a shakeout of the final sellers. Accumulation is positive since it started selling in May; given that it is still working its way up the right side of its base, to have positive accumulation before it makes it closer to its high that started the base is good. Money flow is solid as well. Very nice consolidation of the break over the 200 day MVA, and it looks ready to continue to build the right side of its base.
Volume: 375.6K Avg Volume: 677.954K
BUY POINT: $5.96 Volume=2.1M Target=$7.11 Stop=$5.54
POSITION: Stock (no option chain)
http://www.investmenthouse.com/ci/omx.html
POSS (Possis Medical--$14.15; -0.25; optionable): Medical appliances
http://biz.yahoo.com/p/p/poss.html
STATUS: Testing the breakout. Another stock that is testing its move over its 200 day MVA (13.62) after a solid, high volume break over that level two weeks back. Volume the past three sessions has tapered off to below average levels. Monday volume edged up, indicating that POSS is ready to make a move once again. Accumulation since March is positive at 9 to 6. This is good given the stock is just now starting to build the right side of its base and it indicates that selling was not very severe during the first stages of the base. Money flow is still way out in front of the price as it moves laterally to consolidate the break over the 200 day. We love picking up these stocks after they break the 200 day and consolidate the move as the continuation of the run can really start to flex its muscles.
Volume: 83.25K Avg Volume: 82.272K
BUY POINT: $15.01 Volume=127K Target=$18.45 Stop=$13.75
POSITION: UPQ DV - April 12.50c (70 delta) and/or Stock
http://www.investmenthouse.com/ci/poss.html
End Part 1 of 2
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